Executive Vice President and Chief Financial Officer at Gartner
Thank you, Gene, and good morning. Third quarter results were strong with double-digit growth and contract value revenue and adjusted EPS. FX-neutral growth was even stronger than our reported results. We also delivered better than planned EBITDA margins, reflecting the strong third quarter, enthusiastic demand for our in-person conferences and continued success in balancing cost discipline with investing for future growth we are again increasing our 2022 guidance. Third quarter revenue was $1.3 billion up 15% year-over-year as reported and 20% FX-neutral.
In addition, total contribution margin was 69% down 20 basis points versus the prior year. EBITDA was $332 million up 9% year-over-year and up 15% FX-neutral. Adjusted EPS was $2.41 up 19% and free cash flow in the quarter was $283 million. Research revenue in the third quarter grew 11% year-over-year as reported and 15% on an FX-neutral basis driven by our strong contract value growth. Third quarter research contribution margin was 74% modestly below last year.
The continued higher-than-normal contribution margin reflects improved operational effectiveness, increased scale, travel expenses still modestly below our post-pandemic expectations and research-related headcount with a bit more catch-up still to go. Contract value or CV was $4.5 billion at the end of the third quarter up 14.5% versus the prior year. CV growth is always FX-neutral. Excluding the impact of exiting Russia, growth for Q3 would have been 14.9%. Quarterly net contract value increase or NCBI was $128 million. Quarterly NCBI is a helpful way to measure contracts value performance in the quarter even though there is notable seasonality in this metric.
The sequential increase in CV of $128 million was driven by the combination of continued strong retention rates and near-record new business of almost $250 million similar to the second quarter of this year and the third quarter of 2021. The 14.9% contract value growth was broad-based across practices, industry sectors, company sizes, and geographic regions. Our technology practice grew 13% and all of our business practices led by HR and supply chain grew at double-digit growth rates. All industry sectors including technology grew at double-digit rates, with the fastest growth in transportation, retail and manufacturing. We had double-digit growth across all of our enterprise-size categories with our medium category growing the fastest.
In the small category, the technology sector continued to grow at double-digit rates. We also drove double-digit growth across all of our top 10 countries other than China, where we saw continued single-digit growth. Across our North America and Europe, Middle East and Africa regions, all industry sectors had double-digit growth rates. Global Technology sales contract value was $3.5 billion at the end of the third quarter up 13% versus the prior year. GTS had quarterly NCBI of $88 million driven by strong retention and near-record levels of new business for a third quarter.
While retention for GTS was again strong at 107% for the quarter up about 310 basis points year-over-year. GTS new business was down 5% versus last year up against another tough compare. The two-year compound annual growth rate was about 9%. GTS quota-bearing headcount was up 16% compared to September of last year. Our continued investments in our sales teams will drive long-term sustained double-digit growth. Our regular full set of GTS metrics can be found in the appendix of our earnings supplement.
Global Business sales contract value was $977 million at the end of the third quarter of 21% year-over-year which is above the high end of our medium-term outlook of 12 to 16% GBS. CV increased $40 million from the second quarter, while retention for GBS was 114% for the quarter, up about 120 basis points year-over-year. GBS new business was up 1% compared to last year against the strong compare.
The two-year compound annual growth rate for new business was 18%. GBS quarter-bearing headcount increased 19% year-over-year. Headcount we hire in 2022 will help to position us for sustained double-digit growth in the future. As with GTS our regular full set of GBS metrics can be found in the appendix of our earnings supplement. Conferences revenue for the third quarter was $77 million ahead of our expectations as attendees and exhibitors were excited to get back to the in-person experience. Contribution margin in the quarter was 52%.
We held 10 in-person conferences and three virtual conferences in the quarter. We held meetings in both virtual and in-person formats. We plan to run nine in-person destination conferences in the fourth quarter and have updated our guidance to reflect the strong demand we are seeing. Third quarter consulting revenues increased by 13% year-over-year to $107 million. On an FX-neutral basis, revenues were up 21%. Consulting contribution margin was 35% in the third quarter up 210 basis points versus the prior year with better-than-expected revenue and higher utilization rates.
Labor base revenues were $90 million up 16% versus Q3 of last year and up 26% on an FX-neutral basis. Backlog at September 30 was $162 million increasing 33% year-over-year on an FX basis with another strong bookings quarter. The inclusion of multiyear contracts in our backlog calculation, a change we described earlier in the year contributed about 11 percentage points to the year-over-year growth rate. Our contract optimization business declined 3% reported and 1% on an FX-neutral basis versus the prior year. As we have detailed in the past, this part of the consulting segment is highly variable.
Consolidated cost of services increased 16% year-over-year in the third quarter as reported and 21% on an FX-neutral basis. The biggest drivers of the increase were higher headcount to support our continued strong growth and the return to in-person destination conferences. SG&A increased 20% year-over-year in the third quarter as reported, and 24% on an FX-neutral basis. SG&A increased in the quarter as a result of added headcount for sales and G&A functions and higher commissions following a strong CV growth in 2021. We expect SG&A expenses to increase as a percentage of revenue over the near term as our catch-up hiring continues.
EBITDA for the third quarter was $332 million, up 9% year-over-year on a reported basis and up 15% FX-neutral. Third quarter EBITDA upside for guidance reflected revenue exceeding our forecasts and expenses at the low end of our expectations. Depreciation in the third quarter of $23 million was down modestly versus 2021. Net interest expense excluding deferred financing costs in the quarter was $29 million, down a little over $1 million versus the third quarter of 2021 mainly due to lower interest rate swaps costs. The modest floating rate debt we have is fully hedged through maturity.
The Q3 adjusted tax rate which we use for the calculation of adjusted net income was 24.7% for the quarter. The tax rate for the items used to adjust that income was 20.2% for the quarter. Adjusted EPS in Q3 was $2.41 growth of 19% year-over-year. The average share count for the third quarter was 80 million shares. This is a reduction of about 4.7 million shares or about 5.6% year-over-year. We exited the third quarter with about 80 million shares outstanding on an unweighted basis.
Operating cash flow for the quarter was $315 million down 9% compared to last year. Capex for the quarter was $32 million up about $18 million year-over-year led by increases in capitalized technology labor costs and catch-up laptop spends. Free cash flow for the quarter was $283 million. Free cash flow growth continues to be an important part of our business model with modest capex needs and upfront client payments. As many of -- we generate free cash flow well in excess of net income. Our conversion from EBITDA is very strong with the differences between cash interest, cash taxes and modest capex partially offset by strong working capital cash inflows. Adjusting for the insurance proceeds we received last year free cash flow as a percent of revenue or free cash flow margin was 19% on a rolling four-quarter basis. On the same basis, free cash flow is 76% of EBITDA and 137% of GAAP net income.
At the end of the third quarter we had $529 million of cash. Our September 30 debt balance was $2.5 billion. Our reported gross debt for trailing 12-month EBITDA was under two times. Our expected free cash flow generation, unused revolver and excess cash remaining on the balance sheet provide ample liquidity to deliver on our capital allocation strategy of share repurchases and strategic tuck-in M&A. Our balance sheet is very strong with $1.5 billion of liquidity, low levels of leverage and effectively fixed interest rates. We repurchased more than $1 billion worth of stock through the end of the third quarter. We had about $600 million remaining on our authorization at the end of September, which we expect the board will continue to refresh as needed going forward.
Since the end of 2020 through the end of this September, we've reduced our shares outstanding by 10 million shares. This is a reduction of 11%. As we continue to repurchase shares, we expect our capital base will shrink. This is creative to earnings per share, and combined with growing profits also delivers increasing returns on invested capital over time. We are increasing our full-year guidance to reflect strong Q3 performance and an improved outlook for the fourth quarter despite incremental FX headwinds. We now expect an FX impact or full-year revenue growth rates of about 420 basis points for the full year. This is up from 370 basis points based on rates when we guided in August. As we discussed the last three quarters, 2021 research performance benefited from several factors including QBH tenure mix, NCVI phasing within the quarters and year, record retention rates, and strong non-subscription growth. The growth compares will continue to be challenging for a few more quarters.
We continue to take a measured approach based on historical trends and patterns, which we've reflected in the updated guidance. For conferences, we assume we will be able to run all nine in-person conferences as planned. Consistent with our commentary in the past couple of quarters, our assumptions for consolidated expenses continue to reflect significant headcount increases during the fourth quarter to support current and future growth. We continue to model higher labor costs and T&E teeny well above 2021 levels as we've previously indicated.
We also have higher commission expense during 2022 due to the exceptional performance we delivered in 2021. Finally, we continue to invest in our tech, both client-facing and internal applications as part of our innovation and continuous improvement programs. Our updated guidance for 2022 is as follows. We expect research revenue of at least $4.58 billion, which is FX-neutral growth of about 16%. The FX-neutral growth is up about 60 basis points from our prior guidance due to strong NCVI performance in the third quarter.
We expect conferences revenue of at least $375 million, which is growth of about 84% FX-neutral. We expect consulting revenue of at least $450 million, which is growth about 14% FX-neutral. The result is an outlet for consolidated revenue of at least $5.40 billion, which is FX-neutral growth of almost 19%. The FX-neutral growth is up about 180 basis points from our prior guidance due to strong performance in third quarter and improved outlook for Q4.
Without the strengthening US dollar since August, our revenue outlook would have been about $85 million higher than previous guidance. We now expect full-year EBITDA of at least $1.36 billion, up $125 million from our prior guidance and an increase in our margin outlook as well. Without the strengthening US dollar since August, our EBITDA guidance would have been about $136 million higher than previous guidance. We now expect 2022 adjusted EPS at least $10.06 per share. For 2022, we now expect free cash flow at least $1.025 billion. Our EPS guidance is based on 81 million shares, which reflects year-to-date repurchases.
As a result, we expect to deliver at least $310 million of EBITDA in the fourth quarter of 2022. All the details of our full-year guidance are included on our Investor Relations site. Our strong performance in 2022 continued in the third quarter with momentum across the business. Contract value grew 14%. Adjusted EPS increased 19% fueled in part by the significant reduction of shares over the past year. We are adding associates across the business to keep up with our growth and to position us well heading into 2023. Our continued investments in our teams will drive long-term sustained double-digit growth. We repurchase more than $1 billion in stock this year through September and remain committed to returning excess capital to our shareholders over time.
Looking out over the medium term, our financial model and expectations are unchanged. With 12% to 16% research CV growth, we will deliver double-digit revenue growth with gross margin expansion sales cost growing in line with CV growth and G&A leverage, we can modestly expand margins. We can grow free cash flow at least as fast as EBITDA because of our modest capex needs and the benefits of our clients paying us upfront and we will continue to deploy our capital on share repurchases, which will lower the share count over time and on strategic value-enhancing tuck-in M&A.
With that, I'll turn the call back over to the operator and we'll be happy to take your questions. Operator?